BetterLife Pharma Inc. 10-Q

Item 1. Financial Statements Our unaudited interim consolidated financial statements for the period ended July 31, 2016 form part of this quarterly report. All currency references in this report are to U.S. dollars unless otherwise noted. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three and six month periods ended July 31, 2016 are not necessarily indicative of results to be expected for any subsequent period. 3 Table Of Contents PIVOT PHARMACEUTICALS INC. Consolidated Financial Statements (Expressed in U.S. dollars) Period ended July 31, 2016 (unaudited) and January 31, 2016 4 Table Of Contents PIVOT PHARMACEUTICALS INC. Consolidated Balance Sheets (Expressed in U.S. dollars) July 31, 2016 $ January 31, 2016 $ (unaudited) Assets Current assets Cash 3,050 71,639 Prepaid and other current assets 11,690 31,576 Total current assets 14,740 103,215 Security deposit 2,900 2,900 Total assets 17,640 106,115 Liabilities and Stockholders’ Deficit Current liabilities Accounts payable and accrued liabilities 682,806 397,482 Due to related parties (Note 6) 39,274 37,622 Total liabilities 722,080 435,104 Stockholders’ Deficit Common stock: Unlimited shares authorized, without par value, 75,572,100 and 74,722,100 shares issued and outstanding, respectively 7,317,873 7,054,499 Common stock issuable (Note 4) 4,378 16,206 Additional paid-in capital 10,208,982 6,174,601 Accumulated other comprehensive income 595,085 745,251 Accumulated deficit (18,830,758 ) (14,319,546 ) Total stockholders’ deficit (704,440 ) (328,989 ) Total liabilities and stockholders’ deficit 17,640 106,115 (The accompanying notes are an integral part of these consolidated financial statements) 5 Table Of Contents PIVOT PHARMACEUTICALS INC. Consolidated Statements of Operations (Expressed in U.S. dollars) Three Months Ended July 31, 2016 $ Three Months Ended July 31, 2015 $ Six Months Ended July 31, 2016 $ Six Months Ended July 31, 2015 $ (unaudited) (unaudited) (unaudited) (unaudited) Revenue – – – – Expenses Depreciation and amortization – 92 – 183 Foreign exchange loss 63,129 3,219 77,359 4,366 General and administrative 72 600,006 974,421 874,769 Management fees (Note 6) 1,122,368 1,743,010 3,368,947 2,415,218 Professional fees (6,171 ) 18,384 90,483 227,669 Total expenses 1,179,398 2,364,711 4,511,210 3,522,205 Loss from operations (1,179,398 ) (2,364,711 ) (4,511,210 ) (3,522,205 ) Other (expenses) income Gain on change in fair value of derivative liabilities – 6,167 – 14,958 Total other income – 6,167 – 14,958 Net loss (1,179,398 ) (2,358,544 ) (4,511,210 ) (3,507,247 ) Other comprehensive income Foreign currency translation adjustment (36,363 ) (325,139 ) 150,166 (403,746 ) Net comprehensive loss (1,215,761 ) (2,683,683 ) (4,361,044 ) (3,910,996 ) Net loss per share, basic and diluted (0.02 ) (0.03 ) (0.06 ) (0.05 ) Weighted average shares outstanding – basic and diluted 75,179,627 78,850,723 75,010,761 75,801,336 (The accompanying notes are an integral part of these consolidated financial statements) 6 Table Of Contents PIVOT PHARMACEUTICALS INC. Consolidated Statements of Cash Flows (Expressed in U.S. dollars) Six Months Ended July 31, 2016 $ Six Months Ended July 31, 2015 $ (unaudited) (unaudited) Operating activities Net loss (4,511,210 ) (3,507,247 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation – 183 Fair value of stock options vested 3,858,395 – Loss on change in fair value of derivative liabilities – (14,958 ) Stock issued for services 252,598 3,456,669 Changes in operating assets and liabilities: Prepaids and other current assets 13,686 (989 ) Accounts payable and accrued liabilities 271,953 20,133 Due to related parties – 11,463 Net cash used in operating activities (114,578 ) (34,746 ) Financing activities Proceeds from stock to be issued – 240,000 Proceeds from related party advances 33,000 – Net cash provided by financing activities 33,000 240,000 Effects of exchange rate changes on cash 12,989 1,403 (Decrease) increase in cash (68,589 ) 206,657 Cash – beginning of period 71,639 839 Cash – end of period 3,050 207,496 Supplemental disclosures: Interest paid – – Income tax paid – – (The accompanying notes are an integral part of these consolidated financial statements) 7 Table Of Contents PIVOT PHARMACEUTICALS INC. Notes to the Consolidated Financial Statements Period ended July 31, 2016 (unaudited) (Expressed in U.S. dollars) 1. Nature of Operations and Continuance of Business Pivot Pharmaceuticals Inc. (the “Company”) was incorporated in British Columbia under the Business Corporations Act on June 10, 2002. On April 7, 2015, the Company changed its name from Neurokine Pharmaceuticals Inc. to Pivot Pharmaceuticals Inc. The Company is in the business of developing and commercializing therapeutic pharmaceutical products, focused on the strategy of identifying new therapeutic treatments to address unmet medical needs in women’s health. These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As of July 31, 2016, the Company has not earned any revenue, has a working capital deficit of $707,340 and an accumulated deficit of $18,830,758. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern. 2. Significant Accounting Policies (a) Basis of Presentation The consolidated financial statements and the related notes of the Company are prepared in accordance with generally accepted accounting principles in the United States and are expressed in U.S. dollars. The Company’s fiscal year-end is January 31. (b) Use of Estimates The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, assumptions used to determine the fair values of stock-based compensation and derivative liabilities and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. (c) Interim Financial Statements These interim unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods shown. The consolidated results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. 8 Table Of Contents PIVOT PHARMACEUTICALS INC. Notes to the Consolidated Financial Statements Period ended July 31, 2016 (unaudited) (Expressed in U.S. dollars) 2. Significant Accounting Policies (continued) (d) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidating entities include: % of ownership Jurisdiction Pivot Pharmaceuticals Inc. Parent Canada IndUS Pharmaceuticals, Inc. 100% USA (e) Loss Per Share The Company computes net loss per share in accordance with ASC 260, Earnings Per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. At July 31, 2016 and 2015, the Company had 3,970,000 and zero potentially dilutive shares, respectively. (f) Recent Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations. 3. Property and Equipment Cost $ Accumulated amortization $ July 31, 2016 Net carrying value $ (unaudited) January 31, 2016 Net carrying value $ Office furniture and equipment 1,628 1,628 – – Depreciation expense included as a charge to income was $nil and $183 for the six months ended July 31, 2016 and 2015, respectively. 9 Table Of Contents PIVOT PHARMACEUTICALS INC. Notes to the Consolidated Financial Statements Period ended July 31, 2016 (unaudited) (Expressed in U.S. dollars) 4. Common Stock (a) On February 10, 2016, the Company issued 100,000 shares of common stock to service providers for services provided valued at $68,000. The value of the common stock was based on the market price of the stock on the date of issuance. (b) On February 29, 2016, March 31, 2016, May 2, 2016, May 31, 2016 and June 28, 2016, the Company issued 25,000 shares of common stock on each of these dates to the Company’s CEO as monthly compensation valued at $15,000, $13,750, $7,500, $6,000, and $4,875, respectively. The value of the common stock was based on the market price of the stock on the date of issuance. On July 31, 2016, 25,000 shares of common stock were issuable to the Company’s CEO as compensation and valued at $3,750. (c) In June 2016, 600,000 shares of common stock were issued to service providers and valued at $144,500 based on the market price of the stock on the dates of issuances. (d) On July 31, 2016, 25,000 shares of common stock, valued at $3,750, previously held in escrow were released to a member of the Company’s Scientific Advisory Board (“SAB member”). The value of the common stock was based on the market price of the stock on the date of issuance. On July 31, 2016, common stock with a fair value of $628 remains issuable to this SAB member. 5. Stock Options Effective December 30, 2015, the Company adopted a stock option plan. Under this plan, the Company may grant options to its directors, officers, employees and consultants up to an amount as determined by the Company and will be no more than a percentage of its outstanding common stock as may be required by the stock exchange the Company is listed with. The exercise price of the stock options will be determined by the Company and will be no less than any minimum exercise price as may be required by the stock exchange the Company is listed with. The following table summarizes the continuity of the Company’s stock options: Number of Options Weighted Average Exercise Price (US$) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (US$) Outstanding, January 31, 2015 80,000 0.05 – – Granted 6,200,000 0.10 4.4 4,930,000 Expired (80,000 ) (0.05 ) – – Outstanding, January 31, 2016 6,200,000 0.10 4.4 4,930,000 Granted 7,279,000 0.70 4.6 – Forfeited (2,000,000 ) (0.10 ) – – Outstanding, July 31, 2016 11,479,000 0.48 4.5 200,000 10 Table Of Contents PIVOT PHARMACEUTICALS INC. Notes to the Consolidated Financial Statements Period ended July 31, 2016 (unaudited) (Expressed in U.S. dollars) 5. Stock Options (continued) The fair value of stock-based compensation expense was estimated using the Black-Scholes option pricing model and the following assumptions: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) 200,000 options expiring on November 30, 2020 387 % 1.03 % 0 % 4.3 7,250,000 options expiring on February 22, 2021 433 % 1.03 % 0 % 4.6 29,000 options expiring on May 2, 2021 433 % 1.03 % 0 % 4.8 Additional information regarding stock options as of July 31, 2016, is as follows: Options Outstanding Options Exercisable Exercise Price $ Expiry Date 200,000 100,000 0.25 November 30, 2020 4,000,000 4,000,000 0.10 December 14, 2020 7,250,000 3,625,000 0.70 February 22, 2021 29,000 26,000 0.34 May 2, 2021 11,479,000 7,751,000 $556,211 of stock-based compensation have yet to be recognized and will be recognized in future periods. 6. Related Party Transactions As at July 31, 2016, the Company owed $857 (January 31, 2016 - $800) to a director of the Company, which is unsecured, non-interest bearing, and due on demand. As at July 31, 2016, the Company owed $33,297 (January 31, 2016 – Receivable of $866) to the Company’s Chief Executive Officer. As at July 31, 2016, the Company owed $6,274 (January 31, 2016 - $37,622) to related parties related to stock options to be granted pursuant to the Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 between the Company and IndUS (Note 2). On April 15, 2015, the Company issued 2,000,000 shares of common stock to an officer for services provided. This $191,356 of compensation expense has been included in professional fees. 7. Subsequent Events On August 2, 2016, the Company issued 25,000 shares of common stock to its CEO as compensation, which shares were issuable as at July 31, 2016 (Note 4(b)). On August 30, 2016, the Company issued 25,000 shares of common stock to its CEO as compensation. 11 Table Of Contents